Small businesses will not be required to go digital but free software will be available for the majority of those that do, confirms HM Revenue & Customs in responses to consultations held over the past 8 months on its flagship ‘Making Tax Digital’ project.

‘Making Tax Digital: consultations’ brings together six key consultations, HMRC’s responses to them and – in some cases – draft legislation in a single document that updates progress towards HMRC’s objectives to get millions of businesses to handle their tax affairs online so they get their tax bills right first time, without the need for an annual tax return.

As a result of feedback to the consultations, HMRC has also confirmed that

• businesses will be able to continue to use spreadsheets to record receipts and expenditure, then link to software to automatically generate and send their updates to HMRC

• digitalisation will be optional for the self-employed and landlords with a turnover under £10,000 pa

• the option of accounting for income and expenditure on a simple ‘cash in, cash out’ basis will be extended

• charities will not have to keep their records digitally or make quarterly updates

• taxpayers will have at least a year before any late submission penalties will be applied

The government will be making final decisions on issues such as the initial exemption threshold and deferring the changes for some small businesses before legislation is introduced later this year.

3/2/2017